Monzo denies claims it encouraged customers to go into debt to buy shares
Online challenger bank Monzo told Yahoo Finance UK that “we have never encouraged (and explicitly discourage) people from going into debt to buy shares.”
The rebuttal is in response to claims made in The Times newspaper that it offered customers overdraft facilities in order to buy shares in the company’s latest offering.
A statement on Monzo’s website from Tom Blomfield, CEO and co-founder of the company, said the group “disagrees with the premise of this newspaper article.”
“We don’t encourage our customers to borrow money, from Monzo or anyone else, to buy shares. The article seems to stem from the fact we offer overdrafts to our customers and aren’t withdrawing that facility while fundraising is live.
“It’s also true that Monzo offers an overdraft facility to many of our customers. We only offer these overdrafts if they’ve met strict eligibility criteria that checks if they have a good credit history and can afford the overdraft.
“We don’t encourage anyone to borrow money to make a long-term equity investment. And we aren’t encouraging anyone to use their overdraft to invest in Monzo as part of this crowdfunding round.”
Monzo was founded in 2015 with prepaid debit cards and a mobile app, and was granted a licence to offer current accounts to its customers in 2017. It has 1,200,000 accounts and describes itself as “the fastest growing bank in the UK” with around 3,500 accounts added every day. It raised £1m ($1.28m) in 96 seconds on the crowdfunding website Crowdcube in February 2016, and despite continuing to lose money it was able to raise a further £7.3m over the rest of the year. It announced losses of £33.1m in July 2018.
The Financial Conduct Authority warned against using overdrafts to invest: “People should only invest money they can afford to lose, particularly when investing in illiquid assets. While our rules do not preclude using an overdraft in this way, we would caution against borrowing in order to invest.”
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